October 11, 2006

 

CBOT Corn Review on Tuesday: Tumbles lower on liquidation, wheat

 

 

Chicago Board of Trade corn futures settled with double digit losses Tuesday as profit taking and long liquidation after Monday's sharp run up in values pushed prices lower, sources said.

 

December corn fell 14 cents to US$2.75 1/2 cents per bushel, and March declined 14 1/2 cents to US$2.88. e-CBOT day session volume in December was 71,032 contracts.

 

"At least 10 cents of Tuesday's declines is directly a response from the panic buying at the close on Monday," said John Kleist, with Top Third Ag Marketing in Chicago.

 

When old crop wheat went limit up Monday, it forced short position holders in the corn to cover, he added. Tuesday's market was a "reality check and a needed correction-consolidation ahead of the U.S. Department of Agriculture on Thursday, he noted.

 

In a survey conducted by Dow Jones Newswires, the average of 21 analysts' estimate forecast 2006-07 corn production at 11.144 billion bushels, 30 million bushels above the USDA September estimate.

 

The average estimate of the crop's yield by 20 analysts was pegged at 155.2 bushels per acre, 0.5 of a bushel higher than the USDA's 154.7 September estimate.

 

The average of 14 analysts estimate 2006-07 ending stocks at 1.207 billion bushels, 13 million bushels below the 1.220 billion estimated in September by the USDA.

 

The reports are scheduled for release at 7:30 a.m. CDT.

 

Wheat futures didn't keep going up and a result, the bull market in corn is over, a floor analyst said. Corn is overdone on the upside and was due for a correction, he added.

 

Fund selling also added to the losses with overall fund selling estimated at 5,000 contracts.

 

Export inspections released during the session were slightly below analyst estimates and had little impact. The USDA reported 39.587 million bushels of corn were inspected, slightly below the 40-50 million expected by analysts.

 

On open auction technical charts, 2006 December remained above most major moving averages. December's 14-day relative strength index stands at 60.75, below Monday's reading of 74.14.

 

Buyers Tuesday included JP Morgan, which bought 1,500 March, Rand Financial, which bought 1,500 December, Tenco, which bought 600 March, and Goldenberg-Hehmeyer, which bought 600 July.

 

JP Morgan sold 1,000 December, Fimat sold 600 December and 600 July and Man Financial sold 500 December and400 July.

 

In options trading, JP Morgan bought 2,000 December US$2.80 puts.

 

Oat futures settled moderately lower as commercial, fund and spillover selling weighed on the market, a floor analyst said.

 

December oats declined 6 3/4 cents to US$2.20 1/4 per bushel and March fell 7 cents to US$2.27.

 

Ethanol futures settled mixed in light activity. November ethanol did not trade and settled .005 higher at US$1.895 per gallon. December slipped 1 cent to US$1.875.

 

On Tuesday afternoon, the U.S. Department of Agriculture is scheduled to release the weekly crop progress report at 3:00 p.m. CDT (2000 GMT).